Busting the Myths About a Private Limited Company
The thought of starting your new venture is full of excitement and anticipation. At the beginning of any entrepreneurship journey, the entire process seems to be very simple and easy to accomplish. However, it requires a lot of time and consideration in putting all your finances to build a promising future. If you do not do proper research regarding the field you are about to enter into, it can be quite intimidating and overwhelming to face the upcoming challenges as they will turn out to be unexpected. There are several important aspects of being a successful entrepreneur which you need to consider.
It is a notion that business owners of private limited companies are bound to follow a lot more compliance as compared to partnership companies. It is the major factor that tends to drive the new entrepreneurs to go for a partnership firm rather than a private limited. There are many myths about the private limited company that convey from one individual to others and not appropriate as per the current scenario. It is why it becomes critical to update yourself regularly to address business affairs wisely and efficiently.
Things You Have to Know About the Private Limited Company
A private limited company is a distinct lawful entity which requires a minimum capital investment. The regulatory body, MCA fabricates the guidelines for the company. Under the Company Act of 2013, the process of incorporation and registration takes place. The advantage of having a private limited company is that the members are not fully liable to the losses incurred by the company. Moreover, funds for the company can easily be raised for business requirements.
Myths and Misconceptions
Myth: The Incorporation of the Private Limited Company is an Extensive and Costly Procedure
Fact: Several people believe that the incorporation of a private limited company is an extensive and costly procedure. However, this is not the truth. It was a couple of years ago that this notion used to be relatively true due to the absence of technology. With the incorporation of automation and computerized system, the process of incorporation has become a lot easier and cheaper. It is because of the competitive nature of the Indian economic market.
Myth: The Private Limited Businesses are Obliged to Pay a Higher Tax
Fact: If you get your business registered under the Company Act 2013, you will be liable to pay tax irrespective of the type of business you are running. However, there is a big tax benefit of being a private limited company. The company is obligated to pay tax on its incurred annual profit, unlike the partnership companies.
Myth: It is Not Necessary for the Property Shape and Partnership Companies to Undergo an Audit
Fact: One of the biggest myths about a private limited company is that the partnership and proprietorship firms don’t need to undergo annual audits. The companies that come under these two types of business structures are liable to undergo an audit. These audits are based on their incurred sale turnover by the end of a financial year. If the annual turnover of these companies goes beyond one crore, then it becomes mandatory for them to undergo an audit. On the other hand, if the proprietorship firms fail to get an 8% profit, then the audit becomes mandatory. However, the private limited companies are required to prepare the company annual audit report for every FY, no matter what the yearly sales turnover is.
Myth: The Private Limited Business Structure is Not Suitable for New and Small-sized Ventures
Fact: If you want to see yourself excelling as an entrepreneur, then it is advisable to get your company registered as a private limited company. It will give you some added privileges in due time. This business structure will give credibility to your company. It will become easier for the company to invite sponsors to support the venture. Moreover, as a member of the company, your liabilities are limited. You will not have to wind up the business due to the disputes among the board members of the company.
Myth: It is Not Straightforward to Transfer Shares and Ownership of the Private Limited Company
Fact: As a contradiction to these myths about a private limited company, it is far simpler to wind up and sell a private limited business because of its credibility in the market. The shares of the company can be transferred to another person who will become the subscriber. The company owner can also be changed by transferring the shares and the rights that come along with it. If the business partners have mutually decided to sell the business, then there will not be any problem to distribute the money among them. The division of capital becomes quite simple. It is because the personal properties of the partners are not a part of the business. Every partner will get the money as per the number of shares they were holding.
Myth: Closing the Business of a Private Limited Company is an Extensive and Complicated Procedure
Fact: There is no truth in this notion. The decision to close your business is never easy. The regulatory body has given a choice to opt the Fast Track Exit Scheme. It is to help the company members to get the formalities done for the closure of the business. It will help the private limited company to skip the prolonged process of appointing an official liquidator.
So, did you see the myths around private limited companies which must be holding you keep away from getting registered one?
Where Can I Get Assistance for Company Registration?
Get in touch with one of the best legal advisory firm in the country, 3E Accounting. They will also help you to register your business effectively and efficiently complying all the norms in quick turnaround time. Our team is working hard to meet the demands of every client and serve them in the best possible way. Then, we will guide you by giving our valuable assistance for private limited company registration and clear the myths about the private limited company. We are known for offering top-notch services at an affordable price throughout India and other nations across the globe.